Tracking Device: Real-Time Data Aids Promotions
Data from distributors helps International Dairy Queen track promotions and keep restaurants amply supplied.
By Lisa Bertagnoli, Contributing Editor -- Chain Leader, 5/1/2009
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Tracking distributor information enabled IDQ to ship product for its Thin Mint Blizzard promotion to the Pacific Northwest, where the promotion was doing well, from the Southeast, where the promotion was underperforming. |
At first, juggling that many promotions proved challenging for the Minneapolis-based chain of 5,000 quick-service burger restaurants. "We had huge issues with obsolescence and overruns when we first started running national advertising," says Mike Ochs, vice president of supply chain services at Unified Supply Chain Incorporated, the IDQ subsidiary responsible for distributing product to the IDQ system.
Those aren't problems these days. IDQ now uses the services of a California-based inventory-management company to keep track of what product is going to IDQ's distribution warehouses in more or less real time. That current information helps the chain track how well promotions are doing. It also helps IDQ keep stores amply supplied with product in the case of successful promotions and cut back deliveries when promotions underperform.
One example is Dairy Queen's current Sweet Deals promotion, which offers two-for-$3, three-for-$4 and four-for-$5 bundles from a selection of nine menu items. The promotion launched earlier this year, is performing 5 percent better than expected. "But we have not had one out-of-stocks yet," Ochs says.
"People are looking at promotions as a quick fix," says Carolyn Littlefield, senior marketing manager for iTradeNetwork, IDQ's inventory-management firm. "But it's something that takes a lot of planning." Poorly planned promotions "can lead to huge overstocks, or if you run out, you run the risk of alienating the client you're trying to court," she says.
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The California company collects data from each of IDQ's 27 distributors and translates it into a common format (necessary because each distributor files information in a different way). That information is uploaded onto a Web-based application accessible to Ochs and about a dozen other employees. The report details inventory, sales and purchase orders for each distributor.
The program also tracks regional sales, another big help to IDQ. For instance, last year's Thin Mint Blizzard promotion, one of IDQ's most successful, performed far better in the Pacific Northwest than it did in the Southeast. The inventory-management program helped IDQ recognize that sales trend in time for Ochs to move supplies to the Northwest from the Southeast, thus alleviating inventory obsolescence in one region and shortages in another.
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Ochs stresses the importance of the up-to-date figures. "Before we had this, you'd miss a week," Ochs says. Timely information comes in handy right after a promotion launches, when sales spike and restaurants are more likely to run short of promotion-related supplies. "What used to take us weeks now takes hours," Ochs notes.
The data helps "on both ends of a promotion," he says. "If it's doing way better than expected, we can get product moving to stores faster." If the promotion flops, IDQ can cut back delivery of promotion-related supplies to stores, thus preventing cases upon cases of obsolescent inventory.
That feature is important with its monthly Blizzard promotions: "You have to offer new promotions to keep the brand current and viable, but you have to reduce risk of inventory exposure," Ochs says.
IDQ's distribution arm signed a long-term contract with iTradeNetwork, which also provides quality-management and spend-management services to the chain.
As for the return on investment, "it definitely pays for itself in what we save in obsolete inventory and accuracy of data," Ochs says.
In May, the company will launch a next-generation system that includes a time-saving feature that calculates how long before warehouses run out of a certain item, then runs triage on items in danger of running short. Ochs previously made those calculations himself.
The system's time-saving advantage is nearly as valuable as the data, Ochs adds. "We couldn't possibly manage 20 promotions without [the system], unless we hired a lot more staff," he says.
MORE:
Emerging restaurant chain Roti mixes high and low tech to track promotions.
Uno Chicago Grill's virtual gift cards capture more information.
Tiny social networking site Twitter proves to be a powerful marketing tool.
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